Fury over Centrica profits

GAS giant Centrica was blasted today after revealing it has made a £992 MILLION profit - the day after hitting millions of customers with a record 35 per cent hike in gas bills. The group - which owns British Gas and is Britain's biggest domestic energy supplier - also announced it is making a £144m dividend payout to shareholders.

GAS giant Centrica was blasted today after revealing it has made a £992 MILLION profit - the day after hitting millions of customers with a record 35 per cent hike in gas bills.

The group - which owns British Gas and is Britain's biggest domestic energy supplier - also announced it is making a £144m dividend payout to shareholders.

The group said the price increases were necessary to restore `reasonable profitability' to British Gas, as profits fell by 69 per cent to £166m - and invest in additional gas and power assets. But the news sparked anger from consumer watchdogs.

Adam Scorer from Energywatch said households would be `staggered' at Centrica's profits. He added: "Customers will be outraged to learn that while they ponder how to make ends meet Centrica's shareholders are enjoying an increase in their dividends."

And Tony Woodley, joint leader of the Unite union said: "This combination of massive profits and eye-watering price rises proves that the privatised provision of basic utilities has failed the public.

"They should be taken back into some form of ownership by the community. It is obscene that shareholders should be getting a boost while consumers are facing the prospect of unaffordable price rises."

The half-yearly figures show Centrica's operating profits are down 19 per cent on last year after the group felt the impact of rising wholesale costs at British Gas. But while British Gas earnings were down more than two-thirds from last year's £533m - when Centrica waited before passing on rapidly falling wholesale prices - the firm's production business saw a five-fold jump in profits.

Centrica's gas production and development operation benefited from this year's soaring gas prices to post operating profits of £638m, compared with just £123m during the previous year.

Chief executive Sam Laidlaw said: "We produced a good set of results in tough market conditions and against a record first half in 2007."

He defended the 16 per cent jump in the dividend payout to shareholders as a `purely mechanical' payout based on the company's strong performance during the previous year.

Despite the price hikes at British Gas, Centrica said it had made strides in improving the efficiency of the business in a trading environment `dominated by high wholesale energy prices'. It has cut 8 per cent of its staff and is on track to make £60m in cost savings.

British Gas said it had had to raise prices - despite the pressure on households struggling to cope with surging food, petrol and mortgage costs - because of increasing global demand, diminishing UK gas reserves and record oil prices pushing up its costs.

And rivals are sure to follow after Scottish & Southern Energy last week said it was becoming `more difficult by the day' to resist hitting customers with higher bills.

Money-saving expert Martin Lewis said he was `unsurprised' at the British Gas price rise, warning: "This is not the end of it by any means. British Gas has already hinted it needs to in

crease prices by around 60 per cent to catch up with wholesale gas prices, which means another hefty rise in the new year.

"One effective way of saving money until now has been to opt for a capping deal, where a customer can lock into a current pricing deal. But energy companies are pulling the plug on these opportunities very quickly, and anyone who wants to take advantage of what is left is going to have to act fast."

The cheapest capping deal for most people, operated by Scottish Power, disappeared from comparison sites on Tuesday, though may still be available direct. The only fully available one is from E-on.

Martin's MoneySavingExpert.com website is keeping consumers up to date with a special Cap Watch facility, but he said: "My advice when they've all gone, is to sit tight. There is no point ditching British Gas because they have now increased gas prices by a total of 55 per cent this year, when other energy companies are certain to follow suit."

Until the last couple of years, most of Britain's gas came from the North Sea. But, as reserves diminish, an increasing amount is being imported from countries such as Norway, Nigeria, Saudi Arabia and Qatar.

The country is now importing 40 per cent of our gas needs and this will increase to over 50 per cent in a couple of years' time. This in itself is pushing up UK prices. A further factor is that the price of European gas is index-linked to world oil prices. As oil costs soar, so does the price of gas imported from Europe.